USD/JPY – Yen Higher after Kuroda Comments

The Japanese yen has shown improvement in volatile trading in Friday trading. The pair dropped below the 95 level in the Asian session, and was trading in the mid-94 level early in European trading. The new Bank of Japan Governor Haruhiko Kuroda gave his inaugural press conference, but was short on specifics regarding further monetary easing. In the US, Thursday’s key releases were mostly positive. Unemployment Claims and the Philly Fed Manufacturing Index both beat the market estimates. Existing Home Sales was up slightly from the previous reading, but still missed the market estimate. Friday is a quiet day, as there are no economic releases from the US or Japan.

Bank of Japan Governor Haruhiko Kuroda was in the spotlight on Thursday, as he hosted his first press conference since becoming governor just a few days ago. The world’s third largest economy has been stagnating for years, and Kuroda reiterated his goal of eliminating deflation and reaching the BOJ’s inflation target of 2% within two years. However, Kuroda shied away from offering any specifics on what steps the BOJ was planning. Critics of the Kuroda, including former BOJ Governor Masaaki Shirakawa, have expressed doubts that monetary policy alone will be enough to kick-start the Japanese economy. In any event, no news was good news for the yen, which has rallied against the US currency over the past two days. Analysts expect Kuroda to announce new monetary easing at the BOJ’s next policy meeting in April, so we can expect the yen to remain under pressure.

The latest Eurozone financial crisis is centered on Cyprus, one of the Eurozone’s smallest members. Last weekend, Cyprus signed onto a 10 billion euro bailout package, courtesy of the EU and IMF. Under the agreement, all bank deposits would be taxed, between 6-10%, depending on the size of the bank deposit. This tax was supposed to raise about 6 billion euros. Cypriots were outraged, and on Tuesday, parliament voted overwhelmingly against the bailout deal, despite the government’s pleas that rejecting the agreement could lead to a bank collapse. The ECB shot back, and has threatened to stop providing emergency liquidity to Cypriot banks as of Monday, unless an agreement is reached for a new rescue package. So who will blink first – struggling Cyprus or the ECB? Without these funds, Cyprus could experience a financial meltdown, and there is even talk of the island country exiting from the Eurozone if the parties cannot hammer out an agreement.

US Federal Reserve head Bernard Bernanke had no surprises as the Fed maintained interest rates and the current round of asset purchases. The benchmark interest rate remains at 0%-0.25%, and the Fed will continue to purchase $85 billion in assets each month. There had been speculation that the Fed might modify its monetary policy as the economy as shown signs of improvement and unemployment has dipped lower. However, Bernanke stated that the labor market was still weak and also noted concern about recent tax increases and federal spending cuts. On Thursday, US releases continued to provide more good news. Unemployment Claims were up slightly to 336 thousand, but beat the estimate of 343 thousand. This was the fourth week in a row that the key employment indicator has beaten expectations. There was good news as well from the manufacturing sector, as the Philly Fed Manufacturing Index climbed to 2.0 points, beating the estimate of -1.6 points. Existing Home Sales was up slightly from the February reading to 4.98 million. but fell short of the estimate of 5.02 million. Overall, the numbers were solid and reinforce the sentiment that the US recovery is deepening.

USD/JPY for Friday, March 22, 2013

USD/JPY 94.67 H: 95.06 L: 94.20

In Friday, USD/JPY is showing volatility, as the yen continues to improve against the US currency. The pair is receiving weak support at 94.59. This line was breached earlier, and could continue to be tested.  There is stronger support at 93.14. On the upside, 95.27 is providing resistance. This is followed by resistance at 96.02.

• Current range: 94.59 to 95.27

Further levels in both directions:

• Below: 94.59, 93.14, 92.53 and 91.48
• Above: 95.27, 96.02, 97.24, 98.45 and 99.38

OANDA’s Open Position Ratios

USD/JPY is showing strong movement towards long positions in Friday trading. This activity is reflected in the pair’s current downward trend, as USD/JPY has dropped to the mid-94 level. Further movement in the ratio in this direction would be an indication that trader sentiment expects the yen to continue to improve against the US dollar.

USD/JPY is showing volatility, as the yen has produced a late-week rally against the dollar. Will the yen’s momentum continue? With no economic releases scheduled for Friday, we could see the pair quiet down as the trading week wraps up.

USD/JPY Fundamentals

• There are no scheduled releases out of Japan or the US on Friday.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.